The Indian iron & steel industry, which is struggling to cope up with lower demand and falling steel prices could be furtherLONDON: The global steel industry faces an escalating crisis and any mill closures already in prospect look unlikely to be enough to restore profitability in the sector.

Britain's second-largest steelmaker SSI UK went into liquidation last week, citing a slump in steel prices and record exports from China, which produces half the world's steel.

Similar troubles are circling South Africa's second-largest steelmaker Evraz Highveld Steel and Vanadium, which is undergoing so-called business rescue proceedings, while Tata Steel and US Steel Corp have curtailed capacity this year.

Experts say measures taken so far are nowhere near enough.

"The steel industry is in its worst recession in 10 years, potentially it's as bad as 1991-92," said VTB Capital's global head of commodities research Wiktor Bielski. "There's almost nobody who isn't hurting right now. Less than 50 percent of the global industry can make money at current prices."

Consultants CRU said 700 million tonnes out of a total 2.3 billion tonnes of steelmaking capacity is "spare", with cuts of 400 to 500 million tonnes needed by 2020 to balance the market.

Few believe such cuts will materialise, not least because an estimated 300 million tonnes of spare capacity sits in China, where trimming a sector that employs millions could spark unrest.

"It is the rule of the market. If not China, it will be Indian, Russian or Turkish mills, the more competitive will outlive the high-cost producers in the developed economies," said a China Iron and Steel Association (CISA) officer.

CISA expects China's steel exports will exceed 100 million tonnes this year, after surging 50 percent last year to 94 million. This flood of cheap Chinese steel has helped send global prices to their lowest in 11 years.

MOST EFFICIENT

Consultancy CRU estimates demand, which has been growing anaemically since the financial crisis, will fall 3 percent this year, thanks in part to the economic slowdown in China, which consumes half the world's steel

"Global steel prices have fallen more than iron ore in the last few weeks. In southern Europe we see steel from China at around 300 euros per tonne, significantly below the cost of the most efficient (EU) producer," said Voestalpine Chief Executive Wolfgang Eder.

Scarcely a month goes by without news of new protectionist measures, actions which many experts see as counter-productive in the long run because they reinforce overcapacity.

"The best market is a market that is as free as possible from artificial restrictions within the rules of the World Trade Organisation," said Edwin Basson, director general of the World Steel Association.

Yet protectionism is popular, and political and labour pressures to keep mills running are intense, not just in China, as ArcelorMittal learnt in 2012 when it faced threats of nationalisation on attempting to close blast furnaces in France.

At the same time global steel demand remains lacklustre. Consultancy CRU estimates demand, which has been growing anaemically since the financial crisis, will fall 3 percent this year, thanks in part to the economic slowdown in China, which consumes half the world's steel. It sees compound annual growth in demand of 2 percent between 2015 and 2019.